I Don’t Understand Bitcoin

I have daily conversations where I try to convince friends, family, and skeptics to buy bitcoin. It typically devolves into me citing theories of Austrian Economics and sound money, and them pushing back with other economic theories and political philosophies. It becomes useless intellectual arm wrestling.

So instead of trying to prove how much I think I know about bitcoin — here’s a list of all of the things I don’t know about bitcoin.

I don’t know why bitcoin’s price has been through multiple crash cycles.

Every time the bitcoin bubble pops it has found a way to re-inflate itself and challenge it’s pre-crash all-time highs.

How can something with no centralized authority, no single leader to rally hope in a bear market, survive the liquidity winters that took place in 2011–2012, 2014–2015, and 2018–2019?

I do not know why this happens. No other asset bubble in history has reflated as many times as bitcoin has.

I don’t know why bitcoin hasn’t been hacked or co-opted or destroyed.

Back when it launched in 2009, and following for years afterward, a speculative attack on bitcoin was not expensive (you wouldn’t make money, but you could do it with a couple million bucks).

A bad actor with a little bit of money could have easily double-spent bitcoin and destroyed its integrity. But it didn’t happen. I don’t know why! Seems like a crazy amount of luck. Today you can attack the network, but the cost to do so would be well over $1 trillion — orders of magnitude more expensive than your monetary gain.

I don’t know why bitcoin has any value at all.

It’s volatile, and seems to bounce up and down on a whim. Some say it’s valueless, others say it’s more valuable than anything else on the planet. I love the stock to flow model, but only time will be able to prove it right or wrong.

No one knows what the fair value of bitcoin is, and yet for some reason it’s close to $20,000. Someone, somewhere, is saying it has value to them… but why, I don’t know.

I don’t know what happens as bitcoin scales into a larger market.

It’s a quirky, fun digital hobby at its current market cap — how would nations and people react to it if it grew by 10x or 100x from here? All I know is that so far bitcoin has managed to scale from being used by a couple anonymous computer nerds into a 350 billion dollar industry. This against all odds.

If it’s scaled so far, why can’t it keep going?

I don’t know why bitcoin changes the people it touches.

As I’ve invested in more time and money into bitcoin, my mindset around saving has expanded.

As I’ve gotten friends into it, they’ve turned from spenders into savers. One of them has gone from never having a penny in savings to having close to 1 full bitcoin — all from dollar cost averaging!

I don’t know why it changes our behaviors so dramatically, but it does.

I don’t why bitcoin hasn’t failed.

I can give you my theories and write articles about it and show you books on the subject, but all I can say is that everyday it fails to fail is a day that it appears to succeed.

The longer it exists the more valuable it seems to become. Do I need to understand it to want exposure to this asset? Perhaps over time a consensus about what bitcoin is will form, but at that point it may be too late to profit (it will either be $0 or $1 mil).

Who knows, really?

I can philosophize my way into betting for or against bitcoin, but at the end of the day, this asset doesn’t care about my philosophy. Is that a problem with bitcoin or is that a problem with my own mental models?

Do I need to be a genius to build an investment thesis around bitcoin, or do I just need to have the humility to know that sometimes I just don’t know?